Why Continental independence is good for HoustonSorry for the late post this week. I had been preparing material this weekend for a post originally titled "A better alternative than Continental-United", but then CAL beat me to the punch with their Sunday no-merger announcement. Despite the fact that I wrote an editorial in the Chronicle a number of years ago calling for a CAL-UAL merger, I had shifted to a more neutral stance over the last year, and actually decided I was opposed last week.
Lots of potential downsides of a merger:
- Headquarters, name, and jobs lost
- UAL's half-billion loss the first quarter is a big warning sign that it could be a financial black hole for any company embracing it
- UAL's hubs are getting absolutely pounded by low-fare competition, from Southwest to Frontier to JetBlue to Virgin America, and there doesn't seem to be any way to stop the erosion
- UAL's really degraded service and culture could "infect" Continental
- IAH could lose nonstop flights as more people get routed through the "new" United hubs instead
- IAH, which is really growing as a global hub, could be relegated to regional status as "our Latin America operation"
- Right now, CAL has a lot of very nice, ultra-long-range, international-serving 787s on order. Most will go to Newark, but Houston may get some. Under a merger, Houston would probably lose out to Asia deployments from SF and Chicago.
- Keep headquarters, name, and jobs
- Get some 787s and maybe even China service to Houston
- IAH hub continues to bulk up
- No distracting merger mess. They can seize opportunities as other airlines struggle to consolidate and integrate.
- They would dominate the most lucrative market in America, New York, with strong flights from all three major airports there: LaGuardia, JFK, and Newark. Looks like the would have about 40% market share, which is enough to dominate but shouldn't be an anti-trust issue.
- BA is capacity constrained at its Heathrow hub. CAL can take some of the pressure off with flights to/from Europe via Newark.
- New partners create some very nice route and connection possibilities from Houston: through Tokyo on JAL, through Hong Kong on Cathay Pacific, through London on BA, or even to Australia on Qantas. All good, high-quality airlines.
- They would lose a lot of customers from the Midwest and Southeast that are loyal to NWA and Delta (SkyTeam), but pick up plenty of loyal AA customers from both coasts as well as Chicago and DFW. AA has a reasonably strong presence in CA, which routes very well through IAH to Latin America (actually better than DFW or Miami on AA).